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Interaction and quadratic effects in probit model with endogenous regressors

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  • Zhou, Xianbo
  • Li, Heyang

Abstract

This paper proposes a method to estimate the interaction and quadratic effects in probit model with endogenous regressors, which generalizes Ai and Norton (2003)’s study on the interaction effect in nonlinear model without endogenous regressors. The method is applied to estimate the interaction effect of the new-typed information tool usage and social network and the quadratic effect of age on the household risky assets investment, where the bootstrap standard errors of the two effects are provided.

Suggested Citation

  • Zhou, Xianbo & Li, Heyang, 2021. "Interaction and quadratic effects in probit model with endogenous regressors," Economics Letters, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304559
    DOI: 10.1016/j.econlet.2020.109695
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    References listed on IDEAS

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    1. Xiaoyu Chen & Xiaohao Ji, 2017. "The Effect of House Price on Stock Market Participation in China: Evidence from the CHFS Microdata," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(5), pages 1030-1044, May.
    2. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    3. James W. Hardin, 2002. "The robust variance estimator for two-stage models," Stata Journal, StataCorp LP, vol. 2(3), pages 253-266, August.
    4. Richard, Patrick, 2019. "Residual bootstrap tests in linear models with many regressors," Journal of Econometrics, Elsevier, vol. 208(2), pages 367-394.
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    More about this item

    Keywords

    Endogenous probit model; Interaction effect; Quadratic effect; Bootstrap standard errors;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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